Suddenly new lending programs are being announced, town halls are hastily being arranged and political heavyweights from across the financial and ideological spectrums are falling over themselves to propose their plans for how to get small businesses back on track and hiring.

Over the past month, everyone from President Obama, to House Speaker Nancy Pelosi, to Federal Reserve Chairman Ben Bernanke and to billionaire investor Warren Buffett have addressed the issue. Yesterday was Treasury Secretary Tim Geithner’s kick at the can (watch the video of his speech here), when he chaired a forum on small business financing with FDIC head Sheila Bair and SBA chief Karen Mills.

Geithner said the first part of the recovery was to stabilize Wall Street in order to prop up sagging earnings so investment portfolios stop taking such a beating and hard-hit firms stop laying off employees. “That rise in earnings is not simply because banks are particularly smart or clever,” insisted Geithner in front of an audience of small business owners and lenders.

Geithner added that now that the banking sector has been stabilized, the next step is to get banks lending again to small businesses, which he called “the engines of job growth” and which have historically led the country out of recessions. “It’s because the taxpayers of the United States and their elected representatives decided that to save the economy we had to act to stabilize the financial system. All banks - strong and weak - benefited from those actions and banks bear some responsibility for the extent of the damage caused by this crisis and they carry a substantial obligation to help our communities get back on their feet.”

CRISIS MANAGEMENT 101

Geithner went on to give a brief, but informative, lesson on credit crisis management, stating:

“The basic cycle of financial crises is that credit is cheap and easy to get for a time. Banks relax their standards too much leading to excess lending and excess leverage and then when the crisis hits, banks tend to slam on the brakes, shift to reverse, banks pull back - not just from companies that are at more risk of failure, but from all companies - and this hurts the prudent and the conservative; those with impeccable credit histories as well as those who simply borrowed more than they could afford. Now although the demand for credit necessarily falls in recessions - particularly a recession following a long period of excess borrowing - the risk is that banks overcorrect, forcing viable businesses to layoff workers, reduce wages, close factories and defer investments and left to the market this process can feed on itself. A credit crunch can amplify a recession, slow recovery, cause more businesses to fail, unemployment to rise, putting more pressure on banks to cut credit lines for fear of higher defaults. And if this seems unfair and unjust, if it seems counterproductive to economic recovery and job creation, it is. And that’s why it’s so important in financial crises for governments to act aggressively to break financial panics, to make sure banks are able to fund at reasonable rates and that the overall banking system has enough capital to provide credit.”

Don’t you just wish Mr. Geithner had been your economics professor in university?

Geithner added that small businesses are more reliant on banks for credit and that that credit takes longer to start flowing again after a recession. As a stat, Geithner said just 30 percent of large businesses get their credit from banks, whereas that figure is closer to 90 percent for small businesses. Combined with the fact that small businesses generally have fewer capital reserves to ride out a downturn - usually a personal credit card or by leveraging personal assets, like a home or retirement savings - and if they were unlucky enough to have those with a bank that made bad loans, then they could find themselves in a very tough position.

“This is a very hard problem to solve. It’s something you can’t fix easily and it takes a co-ordinated mix of different strategies and policies.”

Geithner then broke down the Obama Administration’s plan to help small businesses in 6 steps, which are as follows:

1. Provide direct support: Recovery Act, which included tax-relief measures and boosted government-backed lending to small businesses through the SBA.
2. Support small business lenders: New legislation that would provide low-cost capital to community banks, or CDFIs, that serve the hardest-hit areas across the country.
3. Repair securiturization markets: TALF (Term Asset-Backed Securities Loan Facility) program which has helped lower the interest costs on asset-backed loans.
4. Provide guidance to lenders: This is the role of the FDIC’s group, led by Bair, of independent bank supervisors and regulators who will take on the added responsibility of making sure bank examiners don’t overcorrect by pulling back too much on lending to small businesses.
5. Support expanded efforts: Refers to additional programs run by lending agencies like the U.S. Export-Import Bank (EXIM)
6. Put pressure on banks to start using federal assistance programs: This mainly refers to the top 19 banks that were given taxpayer funds under TARP (Troubled Asset Relief Program) to start participating more in SBA lending programs, or to simply start loaning more directly to small businesses.

With his plan outlined, Geithner emphasized the most important step is to get bipartisan support for The Administration’s measures.

“It’s very important that members of Congress work with us to create the conditions that make it more likely that small banks are willing to come take advantage of these programs,” said Geithner. “That means they have to have confidence that if they take capital from the government they will not have to face a change in the rules of the game tomorrow. They need to be confident that if they participate in these programs they’re not going to face conditions in the future that will lead them to regret participating.”

What do you think of Geithner’s speech and the Obama Administration’s plan to help small business? Post your comments below.

BIRMINGHAM, Alabama – It is not an easy time to be an auto dealer. Apart from worrying about when sales will revive, and at what level, Bruce Limbaugh's biggest worry is access to loans.

“This is a major challenge for our industry,” said the owner of Limbaugh Toyota. “Even more than credit for consumers, I am concerned about the lack of commercial lending for dealers. Local and regional banks in particular are spurning our dealers."

Limbaugh’s father bought the Toyota dealership that he now runs back in 1989 and sold it to him in 1995. Like the rest of the U.S. auto industry, Limbaugh Toyota has been hurt by a combination of the recession, the U.S. housing crisis and the credit crunch. So far this year new car sales at the dealership are down 22.6 percent. The industry as a whole has seen U.S. sales fall from a peak of 17 million units in 2005 to an estimated level of just over 10 million units in 2009.

“For us, this truly is a Great Recession," Limbaugh said. "My net worth has been cut in half over the last year."

That said, Limbaugh said that last month was the dealership’s second most profitable October in 20 years, and that sales were actually up over October 2008.

“Every month since February our bottom line has improved,” he said.

Over the past year Limbaugh has cut his staff to 67 from 75. He would “rather not cut that anymore. But the market will dictate that.”

Long term, he believes the auto industry and sales will turn around for what for him is truly a family business. He has three sons and a son-in-law working at his dealership and another son-in-law owns the advertising agency that handles his marketing.

Photo by Carlos Barria

Click here for more Route to Recovery
“Do I think we will recover? Absolutely,” he said. “I’m banking my family’s future on it.”

This week Suster wrote about the things in entrepreneur pitches that give VCs pause when considering whether or not to invest. Suster likens it to the elephant-in-the-room adage, more specifically: “those things that the VC would automatically be thinking about when you’re speaking but he/she may not immediately ask you about either for legal reasons or out of courtesy.”

Suster’s blog goes on to list some real-life examples of pitches he’s heard with Elephant-sized problems, such as the founder is no longer with the company or having Google as a prime competitor. Suster advises entrepreneurs to deal with their issues before they seek funding, as they will inevitably be addressed in their meetings with VCs. Suster says it’s better to be pre-emptive in this regard.

“There is only one way to deal with your Elephants – head on. Don’t pretend it isn’t in the room,” writes Suster. “Know in advance what you’re going to say and don’t wait for the VC to bring it up. When VC’s bring up Elephants they feel like they’re ‘catching you out’ and you’ve lost the high ground.”

REGRETS, I’VE HAD A FEW

If crooner Frank Sinatra was singing about small businesses, he might start off with this Associated Content story by Kevin Hagen that appeared on the Huffington Post about some of the biggest mistakes entrepreneurs make and advice on how to avoid them. Among the mistakes listed are: lack of planning, borrowing too much, spending too much and insufficient capital. We’re pretty sure most of these mistakes could be avoided by better planning, but the list may serve as a good refresher for would-be small business owners.

A more interesting article is “6 Business Mistakes I Hope You Make”, where author Michael Noker details some of the errors he made as an 18-year-old entrepreneur running his own Web-design company. Noker said he started his business for the wrong reason - to pay his tuition - which was expensive, so instead he ended up getting student loans to pay for it and then “had no real pressure or desire to get started, so I never really did.”

BETTER BUSINESS WEBSITES

These days having a decent website is critical for any business, but especially a small one that doesn’t have the same brand power or marketing reach as a large company. This post in Whitney Keyes’s Seattle PI blog by Web designer Erik Parkin serves as a good how-to checklist for small businesses looking to create a stronger online presence.

Parkin, who says he has been making websites for four years, admits it frustrates him “when the client says, ‘Just make it look cool,’ because that doesn’t tell me enough information to build them a website that they can actually use. Your website needs to represent you, not the designer.”

BAYOU LA BATRE, Alabama – Long before America slid into recession in late 2007, shrimp fishermen here on the Gulf Coast had been struggling to make a living.

“Twenty-odd years ago, if a shrimp boat came in with 100 boxes of shrimp, they’d consider that a good catch,” said Avery Bates, vice president of the Organized Seafood Association of Alabama (OSAA). “Now if you come in with 400 you’re barely scraping by.”

The main problem that shrimpers down here say they face is farm-raised shrimp imported from countries like Vietnam or China, or government-subsidized shrimp from Mexico.

“We take it right on the nose,” Bates said. “A lot of our boats have went right out of business.”

Bates said that back in the 1980s, some 4,500 U.S. shrimp boats trawled the waters of the Gulf of Mexico. Now, that number is down to 1,200 and dwindling fast.

The complaint here is similar to one you will here from manufacturers around the country: a cheaper imported product has undercut the market and left local producers fighting to stay afloat. Shrimpers in this small town known as the seafood capital of Alabama say they have had to catch ever more shrimp over the years to keep up.

“The last good year we had around here was 2000,” said Greg Ladnier, owner of Sea Pearl Seafood Co Inc., which processes shrimp delivered by local shrimpers. “Back then a lot of farm-raised shrimp was affected with diseases and we had a good year for catches. So we were able to make up the difference.”

“Since then things have been bad,” he said as workers cleaned his plant following the heavy rains brought by tropical storm Ida. “Unless something changes what’s going to happen is already happening all around us. “

“As the price of shrimp goes down it’s harder and harder to make a profit and keep on going.”

High fuel costs and high maintenance costs have added to shrimpers’ woes and the recession has only made things worse. Shrimp is a luxury item and prices have slumped as American consumers have cut their budgets.

“Shrimp is like steak or hamburger,” said Ernie Anderson, OSAA president as workers at his distribution facility box up frozen shrimp to be hauled to customers. “People don’t have to eat it and it’s something they can do without if they need to spend less money.”

While readying the shrimp boat that he works on for a trip out into the Gulf – Gulf shrimpers will often go out for 20 to 30 days and freeze the shrimp they catch as they go within 30 minutes of catching it – Bob McClintoc said that he had just been looking through the boat’s log back at the year 2000 and regretted that he had.

Back then, the boat would sell “1620s” – meaning shrimp that weigh in at between 16 to 20 to the pound – for $7.40 per pound. Now that catch sells for $2.80 a pound.

“It’s enough to make you sick,” he said. “This is killing us.”

Anderson said that the local industry’s hopes for survival are currently pinned on a state law, which will come into effect next January, that will require restaurants to tell customers where their seafood comes from when asked.

“We believe that given a choice, most people will prefer domestic wild caught shrimp to farm-raised imports,” he said. “That should at least allow us to increase our market share just enough to stay in business,”

He added that the U.S. shrimp industry is lobbying for a national bill along the same lines, but that the restaurant industry and retailers are resisting it.

“Restaurants are not keen to have American consumers know what they’re eating,” Anderson said.

In the meantime, shrimpers like Steve Patronas say that they are caught between the high costs and low prices for their catches that are slowly choking off their way of live.

“Come the spring if shrimp prices are where they are now and fuel prices go up,” he said, standing on the deck of his small boat for shrimping close to shore, “then my boat isn’t going out.”

Photos by Carlos Barria

Click here for more Route to Recovery

President Obama gets an “F” for his small business program. The SBA has guaranteed a paltry 50,000 loans  to the nation’s 29 million small businesses – that’s .0017. Loan volume is down 36 percent from 2008 and 50 percent from 2007. Obama and his advisers have actually done the unimaginable; they have reduced the flow of aid to small businesses in the face of a deep recession. The program’s bank lenders have left $15 billion on the table due to “regulatory problems.” Even an administration plan to provide lending to 70,000 vehicle dealers has no takers and failed.

Administration “experts” allocated less than 1 percent of the stimulus bill to small business. It’s mind-boggling that Washington ignores the biggest economic sector in the country employing 60 million people, producing 50 percent of GDP, and creating 70 percent of new jobs.

In the past several weeks, I have had the honor to lead events for small businesses in 15 cities (including Philadelphia,  Kansas City, Missouri and Baton Rouge, Louisiana) directly engaging with 2500 small business owners (employers only). Ninety-five percent of these business owners feel the administration's stimulus plan and program has badly mistreated small businesses compared to Wall Street and Detroit.

On October 21st, President Obama announced a second stimulus for small business. His new plan must have been a political speech since it lacked specifics as to how many businesses would be helped, how much money would be allocated and distributed, and when the money would actually start flowing.

Recently, the House passed a bill that purports to offer $40 billion to small businesses. The banks, having left billions of dollars on the table, astoundingly were selected again as the prime source of lending.

The bill mentions authorizing the SBA as a lender of “last resort” if certain loans are not funded by the banks, with a complicated process yet to be determined. No amount of authorization is mentioned and the process to achieve “last resort” status has no definition or timeframe. Much of the lending purported in the $40 billion will be achieved by raising the limit on certain types of loans; this way more money can be loaned to fewer businesses providing political cover for Congress and the president.

Here’s a program the president should mandate.

Create a $50 billion pool for direct loans. Mandate that it should be working within 60 days. Make sure everyone understands that you need to go down the “risk curve” just as the administration did for Wall Street and Detroit.

Select a George Patton-like leader to organize a 24-7 program starting now.

Let’s move small business from the “kid’s table” to the Cabinet. Create a full Cabinet post for small business and entrepreneurship.

Let’s get some real accountability on the success of these programs into the public domain. Your administration should publish a weekly report with the number of loans made, the banks providing the loans, the amounts of those loans and where the banks are located. It’s time to hold the bureaucrats’ feet to the fire.

Energize the SBA’s current outreach and guarantee program. The SBA Administrator should be on the road 5 days a week promoting the “Get-A-Loan” program across the country with the SBA’s public relations operatives to promote it. SBA employee and office hours should be reconfigured to include after hours and Saturday hours when small business owner have the time to apply and discuss lending. Make sure the participating banks are present. Telemarketing centers should be set up to contact small businesses directly to discuss new lending programs since most are simply not aware. A large number of SBA employees should be put on cold calling programs to introduce lending programs to small businesses. Have “Get-A-Loan” days twice a week with open houses. Forget direct mail, fancy brochures, and ill-attended conferences that usually write only a few loans if that. Forget websites directed toward emergency preparedness and focus on more immediate loan priorities.  Make sure that calls looking for help do not disappear into voicemail hell.

On October 10, 2008, you stated, “Main Street needs relief and you need it now.” It’s time to stop sending breadcrumbs and deliver the beef.

We start with a program offered by Syracuse University’s Whitman School of Management called the “Entrepreneurship Bootcamp for Veterans with Disabilities“, that just announced it is expanding to include a sixth school, the University of Connecticut’s School of Business. The program, which teaches disabled veterans how to become small business owners, was started by Mike Haynie three years ago and has a current enrollment of 125. To date 225 veterans have gone through the program since 2006.

Haynie, an assistant professor of entrepreneurship at Whitman, told The Post-Standard that he gets 400 applications annually and hates to turn veterans away. “It kills me to have to write a letter to a vet saying, sorry, we can’t help you,” Haynie told the Post-Standard about the program, which has been funded by donations from SU alumni and entrepreneurs. Haynie said the latest expansion will boost enrollment to 150, but he has plans to take the program nationwide. To help facilitate that goal the U.S. government’s Small Business Administration is giving Haynie $450,000 over the next three years.

The program, which is free for veterans, includes a five-week online component, after which participants are flown to one of the participating universities for an intensive 10-day course where they receive instruction on making a business plan, marketing, supply-chain management and legal issues. Accounting firm Ernst & Young donated $50,000 to help Haynie offer additional training to the spouses and other family members of disabled veterans.

Another vehicle to help veteran entrepreneurs is the website ChangeCorp.us, which is an information aggregation platform where veteran business owners can post questions and receive answers from their entrepreneurial peers. The website, currently operating in test mode, also reviews other veteran-based resource sites and its stated mission is “to become an open-source tool controlled by veterans for veterans.”

One of the best resources for veterans seeking advice on how to start, maintain, or grow a business is the SCORE website, which offers 1-on-1 advice from a host of retired business executives from across the country. The site includes links to funding organizations and has a very helpful article detailing what it takes to be an entrepreneur.

Jonathan Bekemeyer got help from SCORE to start his Port Royal, SC-based skateboard shop - Killer Peaks - in 2006, after the decorated former Marine (3rd battalion, 5th Marines) returned home from a tour in Iraq, in which he was wounded twice during the siege of Fallujah in 2004. Earlier this year Bekemeyer’s entrepreneurial effort was honored as the SCORE’s Outstanding Veteran-owned Business Award.

Another cutting-edge business started by a former Iraq war veteran, is Local Motors, a crowd-sourced automobile company whose designs are submitted by an online community of engineers, designers and car enthusiasts. Co-founder Jay Rogers, who also served as a Marine in Iraq in 2004, got the idea for his company while on duty when he saw how the impact America’s reliance on foreign oil - mostly due to cars - was contributing to the country’s military presence in Iraq and decided he could help prevent future conflicts by producing more sustainable vehicles. Rogers told Reuters he placed himself on inactive reserve, came home and enrolled at the Harvard Business School and “started writing the plan for a new car company.” Local Motors just released its first vehicle - the Rally Fighter - that retails for $50,000 and is tailored for off-road use in the deserts of the American Southwest. Rogers said he plans to produce nine more Rally Fighters by next spring.

On the win side of the ledger, a new Intuit survey shows 44 percent of small businesses say they plan to hire in the next 12 months. The data is included in a San Francisco Chronicle story profiling a local Web startup - Airbnb.com - that is doing its part, having hired seven people since April, at a time when national unemployment has reached a 26-year high of 10.2 percent.

But that optimism is tempered by a USA Today story that said the main reason the unemployment rate jumped in October was due primarily to small businesses cutting staff. It seems that while some small companies are starting to hire again, they are still outnumbered by the ones laying off their workers. The story quotes Moody’s economist Mark Zandi, who explained there is a bias towards big companies in how the Labor Department compiles its payroll survey, which showed October job losses were down nearly 50 percent (190,000) from the average of 357,000 in May, June and July.

BANKRUPTCIES HURTING OBAMA EFFORTS

Small businesses are trimming staff, because many of them can’t get the loans they need to stay afloat until the economy picks up again. The Obama administration is ramping up efforts to get more money into the hands of small business owners, but the President’s efforts have been hamstrung by the bankruptcies of two of the country’s biggest small-businesses lenders: CIT and Advanta.

CIT lends to more than a million U.S. small businesses, while Advanta - a small business credit card lender - is trying to collect close to $3 billion in outstanding loans to 360,000 clients. The idea of both CIT and Advanta calling in markers has sent small businesses into a panic. The filings, which came just a week apart, may well be why Obama has chosen next week to stage a small business forum in Washington, in which U.S. Treasury Secretary Tim Geithner and Small Business Administration head Karen Mills will engage small business owners on the best way to get them more financing.

Sensing an opportunity, JPMorgan Chase & Co. announced yesterday it is stepping up lending to small businesses by $4 billion. A Reuters’ story suggested JPMorgan, which received $25 billion in public TARP money, could also be responding to government pressure to do its part to help get the small business economy back on its feet.

AGE BEFORE SIZE

Further along the topic of job creation, the Atlanta Journal-Constitution has a story about a new Kauffman Foundation study that shows how a company’s age, and not its size, is the key factor in how many jobs it creates. The Kauffman study, which used 2007 U.S. Census Bureau data, shows that companies less than five years old created nearly 66 percent of all new jobs. Small business lobbyists typically throw around the stat that 70 percent of all new jobs in the U.S. are created by small businesses, but this report suggests that may not be entirely accurate, as the key is not just that the business is defined as “small”, but rather that it be defined as “young”. According to Robert Litan, one of the report’s authors, this is more than a mere semantic debate.

“This study sends an important message to policymakers that young firms need extra support in the early years of formation so they can grow into viable job creators,” Litan said in a statement. “Sometimes a single barrier, such as limited access to credit for business growth, can mean the difference between survival and failure. We must create an environment that aids firm formation and growth if we are going to turn employment around.”

In general the reaction by small business to the Obama legislation has been largely negative, with the most damning attacks coming from small business lobby groups, the National Federation of Independent Business and the National Small Business Association. In a Wall Street Journal story, titled “Small Business Crunches Numbers“, NFIB senior VP Susan Eckerly said the bill’s “punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation’s economy needs small business to thrive.”

Denver Business Journal reporter Kent Hoover examined the bill from a small business perspective in his article “How small business fares under health-reform bill“. In it Hoover said that while the majority of small businesses oppose the legislation, some support it because “they think the insurance market needs the bill’s reforms, such as barring insurance companies from denying coverage based on pre-existing conditions,” wrote Hoover, adding: “Plus, they think providing a government-run option in new health insurance exchanges would bring needed competition to the insurance market.”

Here’s a roundup of how politicians on both sides view the legislation:

- Democratic Congressman Jerry McNerney (Pleasanton, California) voted for the bill, because he explained that “as a former self-employed small business owner, I’ve personally experienced the effect of rising health care costs and the burden these costs place on our families and small businesses.” McNerney added the new legislation will “improve benefits and quality of care for seniors, help small businesses to stay open and operating, and stop insurance companies from denying coverage for pre-existing conditions or kicking sick people off their plans.” Read McNerney’s full statement here.

- Democratic Congressman Ben Chandler (Versailles, Kentucky) voted against the bill, telling the Lexington Herald-Leader: “I do not believe it is the best course of action for the people of Central Kentucky, specifically our working families, small businesses, and seniors.” Chandler said he was concerned that the new bill “would not adequately protect our rural hospitals and our small businesses — the engines of job creation.” Read Chandler’s full interview here.

- Democratic Congressman Anthony Weiner (New York, NY) released his own “Top 10″ list of reasons he voted for the bill, most of them tailored to his New York City constituents. In the Epoch Times story Weiner said the new Act helps small businesses that already provide health insurance, because they “will receive a tax credit over a two-year period, and small businesses with 25 employees or less with wages of less than $40,000 a year will qualify for tax credits up to half the cost of providing insurance.” Weiner added that 204,200 small businesses in NYC will be able to qualify for the tax credits.

- Republican Congresswoman Shelley Moore Capito (West Virginia) voted against the bill because, as she told the Parkersburg News and Sentinel, it “will cost well over a trillion dollars, raise taxes on job-creating small businesses and cut nearly $400 billion from Medicare and Medicaid.”

"Cloud computing" can sound like a very amorphous concept, perhaps even conjuring up images of important business data floating around in the skies above us. It often raises questions about control and security. But the reality is a lot more down to earth and it is quite simply the future of computing and the way in which businesses will consume pooled resources of software and hardware.

It is not a technology that is on the way or in "beta testing". Cloud computing uses tried and tested software that is just delivered in a new way. It is already empowering thousands of small and medium-sized enterprises (SMEs) in the UK while saving them money, increasing productivity and allowing them to get on with running their business instead of their IT.

The arrival of cloud computing - where software and hardware is pooled centrally and made available over the internet - has parallels with the early use of electrical power. When industry first started using electricity, each business had to build a generating plant.

This model was replaced with large centralised power stations with electricity distributed using the National Grid network - providing customers with "on-demand" power without any investment or maintenance costs and billing based on only what was used.

My business Outsourcery is a leading provider of communications and cloud computing solutions to 25,000 SMEs in the UK. We have two purpose built data centres, complete with security, 24/7 monitoring, expert staff, redundancy and real time back-up of systems and data across two sites that even most corporations could not afford. If one of our data centres was catastrophically destroyed, our customers would probably not even notice.

I have been involved in many start-ups and SMEs where looking after technology was a constant burden - involving the purchase of expensive servers and software and maintenance support.

The same expensive start-up costs were always needed - whether the office had a team of five or 25 people. Data back up solutions, PABX phone systems and the installation of ISDN lines were all part of the expensive communications and IT mix.

All of these systems were separate, with no integration. It usually was not long before we had to hire an IT Manager to look after the "stuff in the cupboard".

Things have changed. Now, businesses of any size can benefit from state-of-the art IT without enduring any infrastructure or maintenance costs. These businesses pay for the service on a per person, per monthly basis.

This is all done without the business needing its own server, telephone system or maintenance contract. Whether the business is a two-man band or a company with 200 employees in different offices, the technology can be rapidly deployed.

When documents, e-mails, contacts and other business critical data are switched from an "on-premise" server inside your office to the cloud it makes them accessible from any PC, laptop or mobile device anywhere in the world.

Mobile and virtual businesses are now a reality. Switching business critical functions to an external "cloud computing" solution is not really about outsourcing. It is more about reducing costs and focussing the resources of a business on what it does best - serving its customers.

Whether we are providing a hosted IT solution to a freight distribution company, a cake shop or a charity - the overarching aim remains the same: we handle the communications and IT while our customer gets on with the business of running their business.

We do this by providing a holistic solution which links an employee's work PC, laptop, landline telephone and mobile together. This is what we call "unified communications" - the seamless blend of real time communication (mobile, voice, video and instant messaging) with non-real time communications (e-mail and voicemail).

This is then seamlessly integrated with mobile devices, document collaboration and customer relationship management (CRM) solutions.

While the case for this type of cloud computing solution is compelling, IT managers of large and small companies still have fears about the risks involved in switching business critical IT functions to an external supplier.

For example, a YouGov survey, commissioned by IT assurance specialist NCC Group, found that 20 percent of IT managers working in large businesses believe that their outsourced systems and processes have less IT security than those based in-house. These fears have doubtless been fuelled by high-profile cases of outages where data has been lost and the common confusion with the low security available for users of consumer focused sites such as Facebook or Twitter.

Thousands of people with Sidekick smart-phones, for example, lost their address books, calendars, photo albums and other personal data which was stored in the cloud. But the reality is that outages where sensitive personal or business data is lost are extremely rare in the business sector. However, choose your hosted IT and communications supplier carefully as they are not all the same. Companies such as Outsourcery are attuned to the growth of cloud computing and the major commitment made to it by global-leading technology companies such as Microsoft and Google.

During my time in business I have experienced a failed IT back-up system - which was a result of it not being set up properly - and days without e-mail as the internet connection cable for our e-mail server had been knocked out by a cleaner and we were all abroad. The fact is that it is far more risky to house a server in your office where an accident or mishap can result in a server being damaged and business critical data being lost forever.

All businesses need to embrace cloud computing as it will make them more efficient and more productive while enriching their working relationships. Businesses already using cloud computing quickly ask themselves how their competitors can cope without enjoying the many benefits that this new technology brings.

I am sure that the last company to ditch its own electricity generating plant for a far cheaper, more efficient and more reliable on-demand supply via the national grid lost out to those that embraced the inevitable process towards the grid earlier on.

Cloud computing is the future of computing.

Cloud dialogues...

Imagine you are sitting in an airport in the U.S. using a wireless network and you urgently need to obtain access to a proposal on your secure intranet that you want to send to an important customer who needs it for a key internal meeting, but it needs to be updated.

You can see in a glance next to the document that one of your colleagues involved in preparing the proposal is available in your London office and online as their "presence" icon, which checks their diary and status, is green. Another is in a meeting and their status is red. You instant message your available colleague to ask whether they can help you to amend the document.

They reply "yes" and initiate a voice call over the internet at no cost. You put on your bluetooth headset, open the document and then start a web conference allowing you to have a face to face conversation.

At the same time you can share the document and collaborate to amend the document in real time. You bring in another colleague by dragging and dropping them in to the call window, but just converse by instant message to ask a few simple questions.

As soon as you've finished, you drop out of the conference, but your two colleagues continue using instant messaging as they've had an idea to improve the document. They actually then go on to escalate to a voice call from their desk phones by one click to continue the conversation. You save the document back to your intranet, which is automatically subject to version control.

You then look at your customer record launched from a CRM solution integrated with Outlook, which lists all of your company's communications with the customer to ensure that somebody hasn't already sent a similar document and pricing to a different decision maker. You then send the document by email to your customer and it is logged in the CRM system automatically and an automated notification is sent to your commercial team - with a link to the document on your intranet - so that they know that a proposal has been issued.

You try to call your customer in London and the call is routed over the internet to the UK where a UK call over the fixed line network is made so that you would only pay for a local call, but there is no answer so you leave a voicemail. You then close your laptop and head to your gate.

As you board the plane your colleague instant messages you on your smart phone to ask whether you got it out in time. As you read the instant message, your customer confirms receipt by email and thanks you for a speedy response and your follow up voicemail.

They also called your office number to thank you, as they don't know where you are, and left a voicemail, which is sent automatically as a sound file to your smart phone. You should have actually diverted all calls to your mobile though using the toolbar in Outlook that controls how people can, or can't, reach you.

You respond to your colleague by instant message typing "they have it. thanks". You then forward your colleague the customer's grateful voicemail as an email attachment from your smart phone - just before you switch off for your flight.

In my business, this is how we work every day. It astounds most people that see these powerful yet cost effective and scalable solutions in action.

Michael Arrington

The saying “he who laughs last, laughs best” comes to mind in relation to a recent spat between TechCrunch founder Michael Arrington and Offerpal Media founder Anu Shukla over Arrington’s assertion that social gaming companies, like Zynga, are making hundreds of millions through “unethical” means.

Arrington’s original post on the issue, titled “Scamville: The social gaming ecosystem of hell”, details how social media sites like Facebook and MySpace are complicit in the scams, because “they’re getting such a huge cut of revenue back from these developers in advertising.”

Arrington followed this up by challenging Shukla at last week’s Virtual Goods Summit in San Francisco; claiming that direct-marketing companies like Offerpal act as middle men in facilitating these scams. Warning the following video has strong language:

It appears as though both sides have been busy doing damage control after the incendiary confrontation, with Offerpal posting a blog defending its position and following up by replacing Shukla as CEO with George Garrick, who formerly guided the successful IPO of advertising firm Flycast Communications, which was eventually sold for $2.3 billion. Garrick was quick to tackle the brewing controversy in his first Offerpal blog, titled “An open letter from Offerpal’s new CEO.”

In it Garrick states: “I’ve only got 48 hours under my belt, and have entered this industry in the midst of a recent firestorm of controversy… I am not going to comment on events leading up to this situation, nor on other players in the industry, but I have quickly concluded that regrettably, Offerpal has been guilty of distributing offers of questionable integrity from some of our many advertisers.”

For his part, Arrington has continued to press the attack, blogging about the showdown and Shukla’s subsequent demotion and soliciting reaction from MySpace and Facebook (“Facebook to increase enforcement of anti-scam rules”). He also posted on Zynga founder Mark Pincus who admitted he deliberately ran these direct-marketing scams in order to raise revenues quickly and show investors his small company was profitable right off the bat. Warning, the following video has strong language:

For Arrington the main point, which is somewhat lost in the melodrama, is that these “scammy” practices by Zynga and others make it virtually impossible for other social gaming startups to participate equally in the space, without running the same unethical business model. In the end they just can’t compete monetarily, says Arrington, as companies like Zynga can outspend them on advertising to get their games on Facebook and MySpace.

“It’s time for this to stop,” wrote Arrington, who definitely had the last laugh in this one. “Facebook and MySpace need to create and enforce rules against it so that game developers aren’t tempted to get a competitive edge by scamming users. And if Facebook/MySpace won’t protect users, then the government will have to step in.”

What do you think of this controversy? Who do you support in the debate: Arrington or Shukla? Should the government police this kind of Internet advertising? Post your comments below.